D.R. Horton, Inc. (DHI), a leading homebuilder in the United States, experienced a significant stock decline after releasing its fourth-quarter earnings report, which revealed a miss on both sales and earnings expectations. The company also issued a cautious outlook for fiscal 2025, highlighting the challenges posed by higher mortgage rates and lingering uncertainty in the housing market.
Despite the disappointing results, D.R. Horton remains optimistic about the long-term prospects of the housing market. The company is actively addressing affordability concerns through various strategies, including offering incentives like mortgage rate buydowns and focusing on smaller floor plans. D.R. Horton acknowledges that the supply of affordable housing remains limited, but emphasizes its strong position for fiscal 2025 with a significant inventory of homes and continuous improvements in construction cycle times.
Here’s a breakdown of the key takeaways from D.R. Horton’s earnings report:
Sales and Earnings
* Sales for the fourth quarter came in at $10.0 billion, falling short of the consensus estimate of $10.2 billion. This represents a 5% decline year-over-year.
* Net sales orders increased by 1% to 19,035 homes but decreased by 2% in value, reaching $7.1 billion.
* Homebuilding revenue rose 2% to $9.0 billion.
* Homes closed during the quarter increased 3% to 23,647 homes.
* EPS came in at $3.92, missing the consensus estimate of $4.17.
Financial Highlights and Future Outlook
* D.R. Horton reported strong financial health, with operating cash flow totaling $2.2 billion in fiscal 2024. The company also holds a substantial liquidity position of $7.6 billion.
* D.R. Horton repurchased 3.4 million shares for $561.2 million during the fourth quarter.
* The company increased its quarterly dividend by 33% to $0.40 per share, payable on November 19, 2024.
* D.R. Horton expects fiscal 2025 revenue to be between $36.0 billion and $37.5 billion, falling below the consensus estimate of $39.4 billion.
* The company projects homes closed for the year to be between 90,000 and 92,000.
* D.R. Horton anticipates FY25 operating cash flow to surpass fiscal 2024 levels.
* The company expects to allocate approximately $500 million to dividend payments and $2.4 billion to share repurchases in fiscal 2025.
Challenges and Opportunities
Despite the company’s positive outlook, D.R. Horton recognizes the challenges posed by elevated mortgage rates and the uncertainty they bring to the housing market. Executive Chairman David Auld emphasized the impact these factors have on potential homebuyers, leading some to remain on the sidelines for the time being.
The company is actively responding to these challenges by focusing on affordability and offering incentives to attract buyers.
Investor Perspective
Investors interested in gaining exposure to the homebuilding sector can explore ETFs like the iShares U.S. Home Construction ETF (ITB) and the Invesco Building & Construction ETF (PKB).
Market Reaction
DHI shares were down 10.2% at $162.00 in premarket trading on Tuesday following the release of the earnings report.
Despite the recent challenges, D.R. Horton’s commitment to affordable housing, strong financial position, and long-term market outlook position the company to navigate the current market environment.
